You are on page 1of 22

Sign In Register

Toggle navigation Order Now

BCG Matrix and VRIO Framework for


OYO Rooms Another Unicorn in the
Making
Posted by Amber Scott on Sep 30 2018

BCG Matrix
The BCG matrix is a strategic management tool that was created by the Boston Consulting
Group, which helps in analysing the position of a strategic business unit and the potential it
has to offer. The matrix consists of 4 classifications that are based on two dimensions.
These first of these dimensions is the industry or market growth. The other of these
dimensions is the relative market share of the strategic business unit. Strategic business
units are placed in one of these 4 classifications. The BCG matrix for OYO Rooms Another
Unicorn in the Making will help decide on the strategies that can be implemented for its
strategic business units.
Strategic business units with high market growth rate and high relative market share are
called stars. Businesses should invest in their stars and can implement vertical integration,
market penetration, product development, market development, and horizontal integration
strategies. Strategic business units with high market growth rate and low relative market
share are called question marks. These strategic business units require close considerations
whether the business should continue with them or divest. Strategic business units with low
market growth rate but with high relative market share are called cash cows. The business
should invest in these to maintain their relative market share. Lastly, the strategic business
units with low market growth rate and low relative market share are called dogs. The
business should divest these strategic business units.

Yes, We Can Help!


We promise to deliver high quality papers on time which will improve your grades. Get help now!

SAMPLES PLACE ORDER OUR SERVICES


Plagiarism Free Work

Best Price Guarantee

100% Money Back Guarantee

Top Quality Work

BCG Matrix of OYO Rooms Another Unicorn in


the Making
The BCG Matrix for OYO Rooms Another Unicorn in the Making will help OYO Rooms Another
Unicorn in the Making in implementing the business level strategies for its business units.
The analysis will first identify where the strategic business units of OYO Rooms Another
Unicorn in the Making fall within the BCG Matrix for OYO Rooms Another Unicorn in the
Making.

Stars
 The financial services strategic business unit is a star in the BCG matrix of OYO
Rooms Another Unicorn in the Making. It operates in a market that shows potential in
the future. OYO Rooms Another Unicorn in the Making earns a significant amount of
its income from this SBU. OYO Rooms Another Unicorn in the Making should
vertically integrate by acquiring other firms in the supply chain. This will help it in
earning more profits as this Strategic business unit has potential.
 The Number 1 brand Strategic business unit is a star in the BCG matrix of OYO
Rooms Another Unicorn in the Making, and this is also the product that generates the
greatest sales amongst its product portfolio. The potential within this market is also
high as consumers are demanding this and similar types of products. OYO Rooms
Another Unicorn in the Making should undergo a product development strategy for
this SBU, where it develops innovative features on this product through research and
development. This will help OYO Rooms Another Unicorn in the Making by attracting
more customers and increases its sales.
 The Number 2 brand Strategic business unit is a star in the BCG matrix of OYO
Rooms Another Unicorn in the Making as OYO Rooms Another Unicorn in the Making
has a 20% market share in this category. It also the market leader in this category.
The overall category is expected to grow at 5% in the next 5 years, which shows that
the market growth rate is expected to remain high. OYO Rooms Another Unicorn in
the Making should use its current products to penetrate the market. This could be
done by improving its distributions that will help in reaching out to untapped areas.
This will help increase the sales of OYO Rooms Another Unicorn in the Making.

Cash Cows
 The supplier management service strategic business unit is a cash cow in the BCG
matrix of OYO Rooms Another Unicorn in the Making. This has been in operation for
over decades and has earned OYO Rooms Another Unicorn in the Making a significant
amount in revenue. The market share for OYO Rooms Another Unicorn in the Making
is high, but the overall market is declining as companies manage their supplier
themselves rather than outsourcing it. The recommended strategy for OYO Rooms
Another Unicorn in the Making is to stop further investment in this business and keep
operating this strategic business unit as long as its profitable.
 The Number 3 brand strategic business unit is a cash cow in the BCG matrix of OYO
Rooms Another Unicorn in the Making. This is an innovative product that has a
market share of 25% in its category. OYO Rooms Another Unicorn in the Making is
also the market leader in this category. The overall category has been declining
slowly in the past few years. OYO Rooms Another Unicorn in the Making has the
power to influence the market as well in this category. It should, therefore, invest in
research and development so that the brand could be innovated. This will help the
category grow and will turn this cash cow into a star. The overall benefit would be an
increase in sales of OYO Rooms Another Unicorn in the Making.
 The international food strategic business unit is a cash cow in the BCG matrix for
OYO Rooms Another Unicorn in the Making. This business unit has a high market
share of 30% within its category, but people are now inclined less towards
international food. This change in trends has led to a decline in the growth rate of the
market. The recommended strategy for OYO Rooms Another Unicorn in the Making is
to invest enough to keep this strategic business unit under operations. If it no longer
remains profitable and turns into a dog, then OYO Rooms Another Unicorn in the
Making should divest this strategic business unit.

Question Marks
 The local foods strategic business unit is a question mark in the BCG matrix for OYO
Rooms Another Unicorn in the Making. The recent trends within the market show that
consumers are focusing more towards local foods. Therefore, this market is showing
a high market growth rate. However, OYO Rooms Another Unicorn in the Making has
a low market share in this segment. The recommended strategy for OYO Rooms
Another Unicorn in the Making is to invest in research and development to come up
with innovative features. This product development strategy will ensure that this
strategic business unit turns into a cash cow and brings profits for the company in
the future.
 The Number 4 brand strategic business unit is a question mark in the BCG matrix for
OYO Rooms Another Unicorn in the Making. This strategic business unit is a part of a
market that is rapidly growing. However, this strategic business unit has been
incurring losses in the past few years. It has also failed in the attempts made at
innovation by research and development teams. The recommended strategy for OYO
Rooms Another Unicorn in the Making is to divest and prevent any future losses from
occurring.
 The confectionery strategic business unit is a question mark in the BCG matrix for
OYO Rooms Another Unicorn in the Making. The confectionery market is an attractive
market that is growing over the years. However, OYO Rooms Another Unicorn in the
Making has a low market share in this attractive market. The low sales are as a
result of low reach and poor distribution of OYO Rooms Another Unicorn in the
Making in this segment. The recommended strategy for OYO Rooms Another Unicorn
in the Making is to undergo market penetration, where it pushes to make its product
present on more outlets. This will ensure increased sales for OYO Rooms Another
Unicorn in the Making and convert this strategic business unit into a cash cow.

Looking For Help With Case Solution On


OYO Rooms Another Unicorn In The Making?
Start your order

Dogs
 The plastic bags strategic business unit is a dog in the BCG matrix of OYO Rooms
Another Unicorn in the Making. This strategic business unit has been in the loss for
the last 5 years. It also operates in a market that is declining due to greater
environmental concerns. The recommended strategy for OYO Rooms Another Unicorn
in the Making is to divest this strategic business unit and minimise its losses.
 The Number 5 brand strategic business unit is a dog in the BCG matrix for OYO
Rooms Another Unicorn in the Making. This is operating in a market segment that is
declining in the past 5 years. The company also has negative profits for this strategic
business unit. However, it is expected that the market will grow in the future with
environmental changes that are occurring. The recommended strategy for OYO
Rooms Another Unicorn in the Making is to invest in the business enough to convert
into a cash cow. This will ensure profits for OYO Rooms Another Unicorn in the
Making if the market starts growing again in the future.
 The synthetic fibre products strategic business unit is a dog in the BCG matrix of OYO
Rooms Another Unicorn in the Making. The market for such products has been
declining, and as a result of this decline, OYO Rooms Another Unicorn in the Making
has been facing a loss in the past 3 years. The market share for it is also less than
5%. The recommended strategy for OYO Rooms Another Unicorn in the Making is to
divest this strategic business unit to minimise any further losses.
 The artificially flavoured products strategic business unit is a dog in the BCG matrix
for OYO Rooms Another Unicorn in the Making. These products were launched
recently, with the prediction that this segment would grow. However, with increasing
health consciousness, people are now refraining from consumption of artificial
flavours. The market is shrinking, and OYO Rooms Another Unicorn in the Making has
no significant market share. The recommended strategy for OYO Rooms Another
Unicorn in the Making is to call back this product.

Some of the strategic business units identified in the BCG matrix for OYO Rooms Another
Unicorn in the Making have the potential of changing from their current classification. For
example, a dog changing to a cash cow. These have been identified in the BCG matrix of
OYO Rooms Another Unicorn in the Making and recommended strategies to ensure such
change have also been made.

VRIO Framework
The VRIO Framework or VRIO analysis is a strategic management tool that is used to
analyse a firm’s internal strengths and resources. It helps identify which one of its internal
strengths and resources can be a source of sustained competitive advantage. The analysis
is based on the idea that a firm’s internal resources are a source of sustained competitive
advantage if they are valuable, rare, cannot be imitated by competition, and are organised
to capture value for the organisation. The VRIO analysis requires looking at a firm's
resources based on these 4 factors.
Based on the analysis, each resource can either provide a sustained competitive advantage,
has a good competitive advantage, temporary competitive advantage, competitive parity or
competitive disadvantage. A sustained competitive advantage exists when a resource is
valuable, rare, non-imitable and organised. A good competitive advantage occurs if it is
valuable, rare, and non-imitable. A temporary competitive advantage exists if it is valuable
and rare. A competitive parity occurs if it is only valuable. Lastly, the resource is a
competitive disadvantage if it is neither of the 4. The analysis takes place in this order by
first assessing whether a resource is valuable, rare, imitable and organised.

References
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of
management, 17(1), 99-120.
Barney, J. (2002). Gaining and Sustaining Competitive Advantage, 2nd ed. Prentice Hall,
Upper Saddle River, NJ.
Cardeal, N., & Antonio, N. S. (2012). Valuable, rare, inimitable resources and organization
(VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to
competitive advantage?
Hambrick, D. C., MacMillan, I. C., & Day, D. L. (1982). Strategic attributes and performance
in the BCG matrix—A PIMS-based analysis of industrial product businesses. Academy of
Management Journal, 25(3), 510-531.
Jurevicius, O. (2013a). VRIO Framework. Retrieved from
https://www.strategicmanagementinsight.com/tools/vrio.html
Jurevicius, O. (2013b). BCG growth-share matrix. Retrieved from
https://www.strategicmanagementinsight.com/tools/bcg-matrix-growth-share.html
Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources? Management
Decision, 53(8), 1806-1822.
Seeger, J. A. (1984). Research note and communication. Reversing the images of BCG's
growth/share matrix. Strategic Management Journal, 5(1), 93-97.
Smith, M. (2002). Derrick's Ice–Cream Company: applying the BCG matrix in customer
profitability analysis. Accounting education, 11(4), 365-375.

15,000+ STUDENTS
can't be Wrong !
2006500
Orders
4.8/5
Ratings

5004
PhD Experts

GET BEST GRADE, ORDER NOW!

Email:

Subject:

--Select Subject-
- Accounting Finance Finance
(With
excel) Statistics Strategy Ope
rations
Management Management Marketing
Economics Entrepreneurship Human
Resource Management Information
Technology Leadership Change
Management Service Management Business
Management Organizational
Behaviour Others

Deadline:

--Select Deadline-- 12
Hours 24 Hours 48 Hours 3
Days 4 Days 5 Days 7
Days 10 Days 2 Weeks 3
Weeks 4 Weeks 6 Weeks 8
Weeks 10 Weeks

Length Words:

GET HELP

Why use our services?


Plagiarism Free Work Talk Directly To Writer Best Price Guarantee 100% Money Back
Guarantee Top Quality Work On Time Delivery 24 x 7 Live Help

Previous 10 BCG Matrix

 Restaurants on the Run: A Founder's Journey BCG Matrix


 Walter Reed National Military Medical Center (A): Vice Admiral John Mateczun and
JTF CapMed BCG Matrix
 Wichita County Health Center: Strategic Planning BCG Matrix
 eRecon Software Development at Hospital Corporation of America BCG Matrix
 Radiation Treatment Machine Capacity Planning at Cancer Care Ontario BCG Matrix
 The Zuellig Family Foundation: A Bridge to a Better Future BCG Matrix
 Kaiser Permanente: Creating a No-Wait Emergency Department BCG Matrix
 Acibadem Healthcare Group BCG Matrix
 Martin Bauer Group: Corporate Social Responsibility with EinDollarBrille BCG Matrix
 Children's Hospital Oakland: End-of-Life Dilemmas BCG Matrix

Order BCG Matrix

Next 10 BCG Matrix

 Amul Dairy: Camel Milk Launch in India BCG Matrix


 Maria's Ristorante BCG Matrix
 Airbnb: Business Model Development and Future Challenges BCG Matrix
 Burger King France: Acquiring the Quick Chain BCG Matrix
 BN Spice N Nice Kitchens Pvt., Ltd.: Runaway Costs BCG Matrix
 The Royal Harbour Resort & Spa BCG Matrix
 Deep Roots Distillery BCG Matrix
 Dieselgate - Heavy Fumes Exhausting the Volkswagen Group BCG Matrix
 Patagonia: Driving Sustainable Innovation by Embracing Tensions BCG Matrix
 Shree Balaji Alumnicast: Going Green BCG Matrix

Order BCG Matrix

Top 10 BCG Matrix

 Spotify BCG Matrix


 OYO Rooms: Another Unicorn in the Making? BCG Matrix
 Dunkin' Donuts (C): Growth Strategy BCG Matrix
 Nirvana Vihar Rehabilitation Homes BCG Matrix
 Costa Coffee (B): Project Marlow BCG Matrix
 Marriott International: The Next 90 Years BCG Matrix
 Dubailand: Destination Dubai BCG Matrix
 Almarai Company: Milk and Modernization in the Kingdom of Saudi Arabia BCG
Matrix
 Body Shop International BCG Matrix
 GOPRO: THE DISRUPTIVE INNOVATOR FACES CHALLENGES BCG Matrix

Order BCG Matrix


Looking For Help With Case Solution On
OYO Rooms Another Unicorn In The Making?
Start your order

 Join the conversation


o support@essay48.com
o Contact Us
o How it works
 Services
o Essay Writing Service
o Term Paper Writing Service
o Dissertation Writing Service
o Case Solution Writing Service
 Useful Resources

o 4.7/5
Based on 2078 reviews from real customers
 Join the conversation
o

We accept

o
B L U E O CE A N

Porter Value Chain Analysis & Case Study Solution


OYO Rooms: Another Unicorn in the Making?
Porter Value Chain Analysis
Porter Value Chain Analysis of OYO Rooms: Another Unicorn in the Making? "Oyo Vit" is
based Michael E. Porter book "The Value Chain & Competitive Advantage - Understanding
Business Processes".
The OYO Rooms: Another Unicorn in the Making? case study is written bySaju B, Harikrishnan
K, Joseph Jeya Anand S and is widely used to help MBA challenges in Leadership & Managing
People field. The areas covered in the case study are - "Competition, Entrepreneurship,
Growth strategy".
Blue Ocean University is a premium organization for learning resources for MBA, Executive
MBA, and Corporate Learning Program.

Value Chain Definition

Porter’s Value Chain is a powerful strategic managmement tool that leaders at Oyo Vit can use to
disaggregate Oyo Vit strategic activities and organize them in a way that can deliver the firm competitive
advantage in its industry through either higher prices or through lower costs.

Case Study Overview

OYO Rooms had been growing exponentially since its inception in 2013. By January 2016, it had
registered 1 million check-ins and was set to become India's largest budget hotel chain. The venture's
unique business model helped it to offer effective solutions for the difficulties that were faced by
customers seeking budget hotel accommodation in India. OYO Rooms' potential for rapid growth made it
a candidate for even greater expansion in the global arena. However, OYO Rooms needed to prove its
ability to sustain growth in the Indian budget accommodations market. The company's success and the
opening of a huge untapped market had led to a flurry of competition. Would the entrepreneurial founder
be able to sustain his company's early momentum in the wake of increased competition? What would be
the best strategy to achieve growth and monetize the company's operations? Should OYO Rooms
diversify into allied services or apply a more focused strategy? The founder needed to answer these
questions to retain the company's dominant position in the market. Saju B. is affiliated with VIT University.
Hari Krishnan K is affiliated with VIT University. Joseph Jeya Anand S. is affiliated with VIT University.

Authors :: Saju B, Harikrishnan K, Joseph Jeya Anand S

Category :: Leadership & Managing People

Key Words :: Competition, Entrepreneurship, Growth strategy

For more information you can check out Case Study Solution Guide of OYO Rooms: Another Unicorn in
the Making?
Porter Five Forces Analysis of OYO Rooms: Another Unicorn in the Making?
PESTEL / PEST Analysis of OYO Rooms: Another Unicorn in the Making?
SWOT Analysis of OYO Rooms: Another Unicorn in the Making?

Porter Value Chain Framework

Value Chain is developed by management guru Michael E. Porter and it was a major breakthrough in
business world for analyzing a firm’s relative cost and value. Value Chain was first introduced in 1985 in
Harvard Business Review article and Porter’s book “Competitive Advantage”. Value Chain is also known
as “Porter’s Value Chain Framework” and it is extensively used to analyze relevant activities of a firm to
shed light on the sources of competitive advantage. According to Michael Porter – Competitive
Advantage is a relative term and has to be understood in the context of rivalry within an industry.

Porter Five Forces & Porter Value Chain

Porter started with the quintessential question – “Why are some companies more profitable than others?”
He answered the question in two parts – How companies benefit or limited by the structure of their
industry, and second a firm’s relative position within that industry.
To conduct industry structure analysis Porter developed Five Forces Model, and to understand the
sources of competitive advantage of the firm in relation to competitors in that industry Porter developed
Value Chain Analysis Method.

The strengths of the Porter’s Value Chain Analysis are - how it disaggregates various activities within the
firm and how it put value to value creating activities in an industry wide context.

Industry Structure Relative Position

Porter's Framework Five Forces Value Chain

The Analysis focuses on Drivers of Industry Profitability Differences in activities

The Analysis explains Industry average price and cost Relative Price and Cost

What is Competitive Advantage?

According to Michael Porter – “If a strategy is to have real meaning then it should reflect directly into a
company’s financial performance”. If Oyo Vit have a real competitive advantage, it means that compared
to its rivals Oyo Vit is - operating at lower costs, commanding a premium price, or doing both. Competitive
advantage is about superior performance and it is a relative term. When all rivals in the Oyo Vit’s industry
try to compete on the same dimension, no one firm gains a competitive advantage.

Key Steps in Porter's Value Chain Analysis

Step 1 - Start by laying out the industry value chain

What are the key value-creating activities at each step in the chain?

Compare the value chains of rivals in an industry to understand differences in prices and costs
How far upstream or downstream do the industry’s activities extend?

Step 2 - Compare firm in OYO Rooms: Another Unicorn in the Making? case study value
chain to the industry’s value chain

Present vs Alternative Value Chain - You should design an alternative value chain and map out areas
where improvements can be made. Comparing two or more alternative value chains can provide a good
insight into bottlenecks within the industry.

Step 3 - Zero in on price drivers, those activities that have a high current or potential impact
on differentiation

Align price drivers in the value chain. Often price drivers are customer expectations that customers are
willing to pay more for. For example customers are willing to pay more for flawless uniform experience in
Apple products even though Apple products are not the cutting edge products.

Step 4 - Zero in on cost drivers, paying special attention to activities that represent a large or
growing percentage of costs

If the strategy dictates cutting cost to be profitable then Oyo Vit should focus on areas that are not adding
value to customers' expectations, and costs that are there because of operational inefficiencies.
Value Chain Analysis of OYO Rooms: Another Unicorn in the Making? Case
Study

VALUE CHAIN AND VALUE SYSTEM


Oyo Vit value chain is part of a larger value system of the industry that includes companies either
upstream (suppliers) or downstream (distribution channels), or both. Manager at OYO Rooms: Another
Unicorn in the Making? needs to see each activity as part of that value system and how adding each
activity or reducing each activity impact the OYO Rooms: Another Unicorn in the Making? value chain.
The decision is regarding where to sit in the value system.
VALUE CHAIN ACTIVITIES – PRIMARY ACTIVITIES &
SUPPORT ACTIVITIES
As per the Value Chain model there are broadly two generic categories of activities – Primary Activities
and Supporting Activities.

What are Primary Activities in Porter’s Value Chain?

As illustrated in the Value Chain diagram, Oyo Vit has five generic categories of primary activities –

INBOUND LOGISTICS
These activities of Oyo Vit are associated with receiving, storing and disseminating the inputs of the
products. It can include material handling, warehousing of physical products, as well as architecture to
receive and store customer information for digital media company. Oyo Vit at present has outsourced
most of its inbound logistics activities.

OPERATIONS
Activities that help the organization to transform raw material into finished products. For the purpose of
this article the definition is broad – it can mean using customer data to serve advertisements based on
usage behavior to clients, moulding plastic to make products etc.

OUTBOUND LOGISTICS
Oyo Vit under takes these activities to distribute the finished products to channel partners and final
buyers. Outbound logistics activities include – wholesalers and retailers order fulfillment, distribution
network, scheduling, processing, and warehousing.

MARKETING AND SALES


These activities are undertaken by Oyo Vit to create means through which the buyer can buy a firm’s
products. These activities include – sales force management, pricing, marketing, advertising and
promotion, channel selection etc.
SERVICES
Oyo Vit needs to provide after sales services and maintenance for successful usage of the product.
Service activities of Oyo Vit can include – part supply, product forward and backend alignment of
software, post sales maintenance, training, and installation services.

What are Support Activities in Oyo Vit Value Chain?

As the name explains, Support Activities of Oyo Vit are the one that supports the firm’s Primary Activities.
Porter divided the Support Activities into four broad categories and each category of support activities is
divisible into a number of distinct value activities that are specific to the industry in which Oyo Vit
operates. The four generic support activities are –

FIRM INFRASTRUCTURE
Firm infrastructure support activities at Oyo Vit consists activities such as – planning, general
management, legal services, quality management and finance and accounting.
Firm infrastructure activities at Oyo Vit supports entire value chain though the scope varies given that
Oyo Vit is a diversified company even within the industry. For example the finance and planning at Oyo
Vit are managed at corporate level while quality management, accounting and legal issues are managed
at business unit level.

HUMAN RESOURCES MANAGEMENT


In an environment where each organization is striving to become a learning organization, Human
Resources Management is key to the success of any organization. HRM support activities include –
Recruiting, Training & Development, Skill Assessment, People Planning, Hiring, Selection and
Compensation at both business unit level and corporate level.
Human resource management affects competitive advantage in any firm, but in some industries it is
defining factor. For example in the consulting companies HR is the main source of competitive
advantage.

TECHNOLOGY DEVELOPMENT
Technology supports almost all activities in modern day organization. In the technology industry,
technology development has become a source of competitive advantage. Technology development at
Oyo Vit may include activities such as - component design, technology selection, feature design, field-
testing, and process engineering.

PROCUREMENT ACTIVITIES AT OYO VIT


Procurement activities at Oyo Vit include activities that are undertaken to purchase inputs that are used
by Oyo Vit’s value chain. It doesn’t include purchase inputs themselves. Purchased inputs may include -
raw materials, supplies, machinery, laboratory equipment, office equipment, and buildings.
Like all other value chain activities procurement also employs technology for things such as –
procedures, vendor management, information system, and supply chain partner qualification rules and
ongoing performance evaluation.

Metrics and KPIs to Avoid while Analyzing OYO Rooms: Another Unicorn in the
Making? Value Chain

Shareholder value, measured by stock price, is not a good barometer to analyze value chain. It is
preferred by top management but it is only useful in long run rather than competitive strategy in short to
medium terms.

Growth or market share is also not a very reliable goal as often firms end up pursuing market share at the
cost of profitability.

Growth in sales is not a good goal for value chain analysis as every managers know that boosting sales
is easy to do by reducing the prices dramatically.

References for OYO Rooms: Another Unicorn in the Making? Porter Value Chain Analysis

OYO Rooms: Another Unicorn in the Making? , Harvard Business Review Case Study. Published by
HBR Publications.

Michael E. Porter (1985) "The Value Chain & Competitive Advantage - Understanding Business
Processes".
Michael E. Porter (2004) "Competitive Advantage: Creating and Sustaining Superior Performance"

Barney, J. B. (1995) "Looking Inside for Competitive Advantage". Academy of Management Executive,
Vol. 9, Issue 4, pp. 49-61

O. E. Williamson, "Markets and Hierarchies"(New York: Free Press, 1975)

Next

 Amul Dairy: Camel Milk Launch in India VRIO Analysis & Solution
 Maria's Ristorante VRIO Analysis & Solution
 Airbnb: Business Model Development and Future Challenges VRIO Analysis & Solution
 Burger King France: Acquiring the Quick Chain VRIO Analysis & Solution
 BN Spice N Nice Kitchens Pvt., Ltd.: Runaway Costs VRIO Analysis & Solution

Previous

 Restaurants on the Run: A Founder's Journey VRIO Analysis & Solution


 Walter Reed National Military Medical Center (A): Vice Admiral John Mateczun and JTF CapMed VRIO
Analysis & Solution
 Wichita County Health Center: Strategic Planning VRIO Analysis & Solution
 eRecon Software Development at Hospital Corporation of America VRIO Analysis & Solution
 Radiation Treatment Machine Capacity Planning at Cancer Care Ontario VRIO Analysis & Solution

© Copyright Blue Ocean University. All Rights Reserved


Designed by Blue Ocean University

Home About Privacy Policy Terms of Use

 Home
 Services
 Live Classes
 Blog
 Order Now

 |0
 I checked into a budget hotel and surprisingly everything was fine. When you book in an
unbranded hotel, you are mentally prepared for leaky bathrooms, dirty beds, noisy air
conditioners, etc.

 But this time I booked my hotel room through Oyo Rooms, an aggregator of budget hotels in
India. I’m sure you have already heard of Oyo Rooms. Started in 2013, it offers a network of
branded budget hotels in India. In a very short span, Oyo Rooms has built a network of
2500+ hotels.

 In a matter of 3 weeks I stayed in Oyo Rooms in 3 different cities across India and I can
certainly tell you that consistent quality is one thing that stands apart.

 As a practitioner of Blue Ocean Strategy, I can see in this success, Value Innovation at work.

 Value Innovation is a central concept in Blue Ocean Strategy. Through this concept
organizations can unlock immense value to customers and simultaneously reduce the cost to
the company. Value is usually attached to tangible things, but in reality, true value to
customers need not be something path breaking. For example, by providing valet parking
when you visit your bank’s down town branch, the bank can unlock huge value. But valet
parking is such a silly and trivial aspect as against bank’s core product features that bank
may see it as a distraction rather than value add.

 (Above illustrated from Blue Ocean Strategy


book) Oyo brings ‘predictability’ as a key value that is usually missing with budget hospitality
sector.
 For prices as low as Rs.1000 per night, one gets free wifi, breakfast, flatscreen TVs, spotless
white bed linen of a certain thread count, branded toiletries, 6-inch shower heads, a
beverage tray, etc.,

 Oyo also have room recommendations for solo travelers, couples, business travelers,
women, etc.

 Most of what you see in 3 star hotels such as fancy lobbies, elegant lounges, superior spa,
etc. are often not the reason one chooses such hotels. Instead, basic hygiene, descent
environment and predictable service drive customers to such branded hotels. The core to
Oyo’s value innovation is to eliminate fancy aspects but retain aspects such as hygiene and
predictability.

 As a result, Oyo is able to drastically reduce the price per room (in comparison to 3 Star) and
simultaneously but disproportionally increase the value to customer.

 Oyo unlocks disproportionate business by attracting 3 star customers to trade down while
non-star customers trade up to Oyo Rooms. Thus Oyo is capturing the both segment of
customers!

 To understand this better, let’s look at that strategy canvas, a critical tool of Blue Ocean
Strategy used to create value innovation.

Strategy Canvas is one of the simplest, yet most powerful tools of Blue Ocean Strategy to
visually identify the factors that any given industry is competing on. It helps to strategize how
differentiation can be carved out as against competition. Each factor in the graph that
unlocks value to customers is rated in the 10 point scale and compared against competition
or industry strategic groups.

 Oyo is a evident case of Blue Ocean because in comparison to either the existing star hotels
or non-star hotels, Oyo has chosen to differentiate themselves by Eliminating some existing
features, Reducing some features, Raising some and simultaneously Creating few new
features. Traditionally companies focus on outserving the competition but Blue Ocean
advocates differentiation through Elimination, Reduction, Raising and Creating.

 I should confess that Oyo Rooms isn’t the first hotel ever to try this. There are many such as
Formula1 Hotels, Ginger Hotels, etc. which have attempted to create a differentiation. I
should credit Oyo not only for their excellence in execution, but also in striving to find
innovative ways to keep the financials intact. For example, Ginger Hotels unsuccessfully
tried to target the same segment despite having own/leased properties. On the other hand,
Oyo Rooms has positioned itself as an aggregator brand rather than a traditional hotel chain.
This has helped them to stay fit on capital and operational costs, and more importantly, ramp
up in no time.

 In order to create Blue Ocean in your own industry, consider the steps involved in creating
Blue Ocean are illustrated in the below image:

(Above illustrated
from Blue Ocean Strategy book)

 You can learn more about the 6 paths to create exceptional buyer utility here.

 Oyo Rooms is already facing the heat of competition of me-too brands. In order to sustain
position, Oyo will have to constantly refine its offering to unlock value for customers. For
example, I found that none of the 3 Oyo Rooms I stayed in has overnight laundry or iron box
on the house. I can’t land up for client meeting in wrinkled outfit J. Similarly none of them
have tea bags and kettles in the room and room service didn’t start before 8 AM.
 Super imposing the Blue Ocean Strategy and its framework is only an attempt to learn how
innovations can become predictable rather than a chance of luck or brilliance of genius. If
you are now tickled to create a blue ocean, this article has achieved its purpose and so
would I.

You might also like